Article 101 of the Treaty on the functioning of the EU (ex Article 81 TEC) declares that all agreements between undertakings, decisions by associations of undertakings and concerted practices which may affect trade between Member States and which have as their object or effect the prevention, restriction or distortion of competition within the common market shall be prohibited as incompatible with the common market. In particular, this article prohibits agreements which: (a) directly or indirectly fix purchase or selling prices or any other trading conditions; (b) limit or control production, markets, technical development, or investment; (c) share markets or sources of supply; (d) apply dissimilar conditions to equivalent transactions with other trading parties, thereby placing them at a competitive disadvantage; (e) make the conclusion of contracts subject to acceptance by the other parties of supplementary obligations which, by their nature or according to commercial usage, have no connection with the subject of such contracts. Prohibited agreements shall be automatically void.
However, under paragraph 3 of Article 101, the Commission may declare the provisions of paragraph 1 of that Article inapplicable in the case of any agreement or category of agreements between undertakings, any decisions by associations of undertakings and any concerted practice or category of concerted practices, on the following conditions: that they contribute to improving the production or distribution of goods or to promoting technical or economic progress, while allowing consumers a fair share of the resulting benefit, and that they do not afford such undertakings the possibility of eliminating competition in respect of a substantial part of the products in question. On the basis of Regulation 1/2003, agreements, decisions and concerted practices, caught by Article 81 § 1 of the TEC (new Article 101 § 1 of the TFEU), which satisfy the conditions of Article 81 § 3 of the TEC (Article 101 § 3 TFEU) are not prohibited, no prior decision to that effect being required. These conditions can, however, be controlled at any time by the European competition network [see section 15.2.1].
The Commission has issued Guidelines on the applicability of Article 101 of the TFEU to horizontal co-operation agreements, i.e. agreements entered into between actual or potential competitors or even between non-competitors active in different geographic markets, but in the same product markets [Communication from the Commission]. Horizontal co-operation agreements can lead to substantial economic benefits, in particular if they combine complementary activities, skills or assets. They help to share risk, save costs, increase investments, pool know-how, enhance product quality and variety, and launch innovation faster. On the other hand, horizontal co-operation agreements may lead to competition problems, notably if the parties agree to fix prices or output or to share markets or if they gain or increase market power, thereby giving rise to negative market effects with respect to prices, output, product quality, product variety or innovation. The Commission guidelines provide an analytical framework for the most common types of horizontal co-operation agreements: research and development agreements, production agreements including subcontracting and specialisation agreements, purchasing agreements, commercialisation agreements, standardisation agreements including standard contracts, and information exchange. They are meant to assist businesses in assessing the compatibility of an individual co-operation agreement with Article 101.
It ensues that not all agreements between European undertakings are prohibited - far from it. Most are even desirable with a view to improving the structures of European industry, as we see in the relevant chapter [see section 17.2.4]. In parallel with the elimination of situations incompatible with the system of competition and market unity, the Commission has in fact always pursued a policy of encouraging cooperation between undertakings where, in its opinion, such cooperation is compatible with the common market and can produce favourable economic effects.
Over the years, the Commission has endeavoured to specify, in a double series of measures, some of which were individual and some general or sectoral (e.g., air transport or telecommunications) [see sections 17.3.6 and 20.3.5], those agreements not covered by the prohibition in Article 101 § 1 (ex Article 81 TEC) [see section 15.3.2] and those which, although covered by the prohibition, were likely to be exempted from it [see sections 15.3.1 and 15.3.3]. Individual exemption decisions do not lend themselves to ill-considered generalisation, as the conditions for exemption can only be specific on a case-by-case basis. However, some types of clearly defined agreements are covered by group exemptions.